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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






2. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






3. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






4. 0 < Ei < 1






5. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






6. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






7. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






8. The practice of selling essentially the same good to different groups of consumers at different prices






9. Ed = 1






10. The price of a good measured in units of currency






11. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






12. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






13. The mechanism for combining production resources - with existing technology - into finished goods and services






14. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






15. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






16. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






17. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






18. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






19. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






20. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






21. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






22. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






23. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






24. A good for which higher income increases demand






25. The ability to set the price above the perfectly competitive level






26. MUx / Px = MUy/Py or MUx/MUy = Px/Py






27. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






28. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






29. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






30. Models where firms agree to mutually improve their situation






31. Total product divided by labor employed. APL = TPL/L






32. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






33. The total quantity - or total output of a good produced at each quantity of labor employed






34. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






35. All firms maximize profit by producing where MR = MC






36. Entry of new firms shifts the cost curves for all firms upward






37. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






38. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






39. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






40. TR = P * Qd






41. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






42. The most desirable alternative given up as the result of a decision






43. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






44. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






45. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






46. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






47. ATC = TC/Q = AFC + AVC






48. Exists if a producer can produce a good at lower opportunity cost than all other producers






49. The change in quantity demanded resulting from a change in the price of one good relative to other goods






50. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good